• Revenue: $142 million, down 6% year-on-year and from Q1 2024.
• Adjusted EBITDA: $23.5 million, consistent with expectations.
• Adjusted EBITDA Margin (Completion Fluids and Products): 31.7%.
• Adjusted EBITDA Margin (Water and Flowback Services): 14.6%.
• Trailing 12 Months Adjusted EBITDA: $101 million.
• Trailing 12 Months Total Adjusted Free Cash Flow: Over $7 million.
• Current Liquidity: Approximately $197 million.
• Capital Expenditures: $23 million invested in Arkansas.
• Net Leverage Ratio: 1.5 times.
• Return on Capital: 16.6% for the trailing 12 months.
• Marketable Securities: Over $14 million.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tetra Technologies Inc (NYSE:TTI) achieved adjusted EBITDA margins of 31.7% for completion fluids and products, and 14.6% for water and flowback services, indicating strong operational efficiency.
• The company secured a major Deepwater Completion Fluid Award in Brazil, establishing itself as a leader in the deep water heavy fluids market in the region.
• Tetra Technologies Inc (NYSE:TTI) set an all-time record for produced water recycling for frac reuse, showcasing its commitment to sustainable practices.
• The company is advancing its strategic initiatives, including the introduction of Tetra X, a new corrosion inhibitor for high-temperature downhole well environments.
• Tetra Technologies Inc (NYSE:TTI) has a strong financial position with a trailing 12 months adjusted EBITDA of $101 million and a net leverage ratio of 1.5 times, indicating financial stability and capacity for future investments.

Negative Points

• Third quarter revenue of $142 million was down 6% year-on-year and from the first quarter of 2024, reflecting challenges in maintaining growth.
• The decline in US onshore frac crew activity has lowered completion-related revenues, putting pressure on margins in the water and flowback services segment.
• Hurricanes in the Gulf of Mexico impacted deepwater completion schedules, causing delays in projects and affecting revenue projections.
• The company anticipates a fourth-quarter slowdown in the water and flowback services segment due to seasonal factors and reduced activity levels.
• Tetra Technologies Inc (NYSE:TTI) faces uncertainties related to the timing and approval of permits for its water desalination projects, which could impact the rollout of these initiatives.

Q & A Highlights

Q: As we think about the conversations you're having on deep water projects, where do these stand as far as the conversations? Are these projects underway or is it something else that gives you confidence? A: Brady Murphy, CEO: We've been tracking a pipeline of CS Neptune projects. Many were paused due to COVID but are now moving forward. We've announced our first three-well award with a super major starting in Q1. We're cautiously optimistic about securing more Neptune projects in 2025. These are not projects where drilling has already started, so timing is crucial. Neptune is unique with no competing offerings in its price range.

Q: Regarding the water and flowback business, would you expect to see growth in that business under a flat US activity scenario for 2025? A: Brady Murphy, CEO: It's early to predict 2025 fully, but we anticipate a Q4 slowdown with typical seasonality. Q1 should start flattish to up from Q4. We're more focused on margin enhancement than growth. We've gained market share through produced water but aren't investing heavily in growth next year. We're investing in automation technology to improve margins.

Q: Can you walk us through the process for water desalination at the EP level and how you factor in timing? A: Brady Murphy, CEO: It's an emerging market. We've been working with one customer for a couple of years and are close to moving forward with a project in the Permian. We've opened dialogues with seven customers under NDAs and are negotiating with two more. The process involves analyzing water samples, running them through pilot operations, and then moving to commercial pilots. We've been successful with every water treatment asked of us.

Q: Could you discuss your expectations for the AOGC ruling on lithium royalties and any important notes from an outside perspective? A: Brady Murphy, CEO: The hearing is set for November 4th. We've prepared a justifiable royalty structure to support investment in lithium and benefit Arkansas residents. The state is motivated to set this royalty to move investments forward. Until the royalty is set, no project commitments will be made. We can't predict the outcome but are hopeful.

Q: Could you discuss how your desalination technology compares to others and its advantages? A: Brady Murphy, CEO: Our process involves three stages: pre-treatment, membrane technology, and post-treatment. The first stage is proprietary, developed through our recycling services. We use membrane technologies like osmotically assisted reverse osmosis for low TDS water and vacuum membrane distillation for high TDS water. These are proprietary for oil and gas applications. The third stage is a final treatment based on customer specifications.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.